Have to give them an “A” for effort. “Patent troll” MPHJ Technology Investments, LLC sued the FTC hoping to shut down its investigation into the company because the investigation violated MPHJ’s First Amendment rights to petition. A West Texas federal judge recently ruled that MPHJ could not “derail” the FTC investigation with such a claim.
MPHJ, which had bought a number of patents related to computer scanning programs, mailed demand letters in an effort to license its patents to various companies that were already using similar technology. But MPHJ didn’t stop there. Many of the letters also threatened to sue those same companies if they didn’t sign license agreements and pay MPHJ’s demanded licensing fees. Those inquiry letters landed MPHJ in hot water with the attorneys general of various states, including Vermont and Nebraska—and with the FTC. Specifically, the FTC is investigating whether the inquiry letters violated Section 5 of the FTC Act. The FTC has already offered to settle the matter with MPHJ via a consent judgment, but MPHJ rejected the offer, leaving the investigation open and pending. Indeed, the Commissioners have yet to make a final decision about bringing any enforcement action at all, which would be accomplished by a majority vote.
MPHJ fought back against the investigation, bringing a declaratory judgment action against the FTC in January in the Western District of Texas. MPHJ alleged that its letters, seeking to license government-issued patents, were protected First Amendment petitions, and that the FTC continued to violate MPHJ’s constitutional rights by investigating those licensing activities. MPHJ wanted the court to order the FTC to halt its investigation.
Judge Walter S. Smith, Jr., ruled that because the Commissioners had not affirmatively voted to initiate an enforcement action—and, thus, there had been “no FTC action beyond the investigative stage”—MPHJ lacked standing, and its claim lacked ripeness. The court also found that MPHJ’s declaratory judgment action “was subject to administrative exhaustion,” which it lacked because, again, the matter had not progressed past the investigative stage. On those grounds, the court dismissed MPHJ’s suit.
For MPHJ, it’s yet another loss, and now, while subject to multiple actions by various state attorneys general, MPHJ must sit and await an enforcement action from the FTC (or appeal Judge Smith’s decision). This case sounds a note of caution to those representing clients in administrative investigations – wait until the agency/Commission affirmatively votes to initiate an enforcement action before seeking a court’s declaration that the client’s Constitutional rights have been violated.